One problem: If video games are so successful, why are video game workers getting laid off like they work in newspapers? In the first six weeks of 2024, the industry has announced more than 6,000 job cuts, according to a Kotaku tally — already outpacing a brutal layoff year in 2023. That includes 1,900 jobs from Microsoft’s gaming division just months after its $69 billion acquisition of publisher Activision Blizzard. The bleeding of jobs is more than 12 times worse than the famously beleaguered news industry, which shed 500 jobs by the end of January.
About 35 percent of game developers say they’ve been affected by layoffs in the past year, according to a recent survey of more than 3,000 developers conducted by the Game Developers Conference.
There are a number of factors influencing the mass layoffs, including some driving the waves of job cuts in the broader tech industry. Acquisitions seem to be a culprit, with Microsoft “reorganizing” Activision Blizzard following the company’s purchase. Embracer Group, a Swedish holdings company, made headlines in recent years by acquiring a number of classic video game studios such as Crystal Dynamics, but the collapse of a funding deal with a company funded by the Saudi government led to hundreds of lost jobs.
Last year was also an unusually busy year for games, with many titles winning critical acclaim. Yet despite that, U.S. consumers spent $57.2 billion on games in 2023, according to data from the Entertainment Software Association and Circana. That’s up 1.1 percent from 2022 but still down from 2021’s $60.4 billion, a record year boosted by the inertia of people under a pandemic lockdown. Meanwhile, with inflation and the fact that many of these companies are in expensive-to-live areas such as San Francisco and Los Angeles, the games business has gotten only more expensive.
“It’s an industry that didn’t really grow. And what happens when an industry doesn’t grow? You end up with some job eliminations, which we had,” said Microsoft Gaming CEO Phil Spencer on a company podcast Thursday. “We had even our own hard decisions to make about building a sustainable business for ourselves, but in no way were we alone in that.”
“No game makers budgeted for 40-year highs in inflation. Nor did they budget for revenue stagnation,” Matthew Ball, a venture capitalist and former head of strategy at Amazon Studios, wrote in a recent essay analyzing the games market. (Jeff Bezos, founder of Amazon, owns The Washington Post.) “But not only has gaming underperformed most sectors, it’s one of few media categories to shrink.”
Film, TV and books all saw boosts in consumer spending during 2023. Gaming’s only dance partner in media revenue decline? Surprise, it’s just newspapers and magazines. Post-covid regression sounds familiar, especially at The Washington Post, where 240 employees just accepted a buyout package following a burst in pandemic-era hiring.
However, gaming’s disruptive and startling layoffs have precedent. Bloomberg News’s Jason Schreier, a veteran games journalist, wrote a column called “Why game developers keep getting laid off.” It published in 2014.
In the piece, Schreier describes “seasonal layoffs” as normal, particularly if projects don’t go exactly as planned or scheduled. A small delay in shipping schedules can result in job loss. But even if a title succeeds, game publishers often over-hire to finish projects, and the ax drops on jobs that publishers can’t afford to retain full-time.
“This idea of it being an unprecedented year, I think, is a little off-base,” Schreier said. “It’s going to keep being bad this year and every year because it’s a hit-driven, volatile business.”
The hits will keep coming. Sega of America will shed 61 jobs, according to a layoff notice filed in California. About 56 percent of game developers are concerned their company could see layoffs this year, according to the GDC survey.
It seems budgets will keep ballooning, too. The industry has been chasing more expensive technology at a pace many feel is unsustainable. Former PlayStation executive Shawn Layden has been sounding the alarm bells on this issue, pointing to the old standard retail price of $60 for games, and how the consumer market vehemently resists paying much more. Big budget games now cost $70, but many companies have said that’s still not enough to cover the costs. Video games can’t be this big, this expensive, all the time and remain a sustainable business.
“I don’t think that, in the next generation, you can take those numbers and multiply them by two, and think that you can grow,” he said in a 2020 interview with GamesIndustry.biz.
In December, hacked files revealed that PlayStation game “Marvel’s Spider-Man 2” tripled its budget from the last game to more than $300 million. Those hacks also revealed that PlayStation had mulled the idea of selling the third Spider-Man game in two parts, raising the consumer asking price to $140.
“I reckon we’re going to be hearing a lot on this topic in 2024,” Layden posted in response to that news.